COURT OF APPEAL FOR BRITISH COLUMBIA

Citation:

Yeung (Guardian ad litem of) v. Au,

 

2006 BCCA 217

Date: 20060503


Docket: CA032501

Between:

Jennifer Yeung, by her Litigation Guardian Heide Yeung

Appellant

(Plaintiff)

And

Henry Ming Hang Au, also known as Ming Hang Au,

Transportaction Lease Systems Inc. and

Anthony Tak Kai Au, also known as Tak Kai Au

Respondents

(Defendants)

 

 

Before:

The Honourable Madam Justice Rowles

The Honourable Madam Justice Newbury

The Honourable Mr. Justice Low

 

The Honourable Mr. Justice Thackray

 

The Honourable Madam Justice Kirkpatrick

 

W.S. Berardino, Q.C. and

J.E. Murphy, Q.C.

 

Counsel for the Appellant

J.M. Sullivan and

A.J. Staunton

Counsel for the Respondent

Transportaction Lease Systems Inc.

 

G.S. Pun

Counsel for the Respondent

Henry Ming Hang Au, also known as Ming Hang Au

 

Place and Date of Hearing:

Vancouver, British Columbia

 

March 23, 2006

 

Place and Date of Judgment:

Vancouver, British Columbia

 

May 3, 2006

 

 

Written Reasons by:

The Honourable Madam Justice Newbury

Concurred in by:

The Honourable Madam Justice Rowles

The Honourable Mr. Justice Low

The Honourable Mr. Justice Thackray

The Honourable Madam Justice Kirkpatrick

 

Reasons for Judgment of the Honourable Madam Justice Newbury:

[1]                This appeal involves the interpretation of s. 86 of the Motor Vehicle Act, R.S.B.C. 1996, c. 318 (the “Act”).  Section 86 imposes vicarious liability on certain persons for the negligent operation of motor vehicles by others – a principle that involves its own particular social and economic policy objectives.  If the respondent is correct, however, it also involves consideration of the definition of a term contained in the Sale of Goods on Condition Act, R.S.B.C. 1979, c. 373.  That statute, which regulated the rights and obligations of debtors and creditors with respect to certain forms of chattel security, was repealed in 1990.  Like its antecedents from 1922 onwards, it contained a definition of the phrase “conditional sale” that extended the application of the statute beyond a conditional sale contract in the traditional common law sense - i.e., an agreement under which a purchaser has agreed to purchase goods and the seller retains title until the price is paid in full.  (See R.M. Goode and Jacob S. Ziegel, Hire-Purchase and Conditional Sale:  A Comparative Survey of Commonwealth and American Law (1965), at 5.)  The new statutory definition enacted in 1922 also reached any contract for the hiring of goods under which the hirer had an option to acquire the goods “on full compliance with the contract”.

[2]                When the Sale of Goods on Condition Act and various other commercial statutes were repealed on October 1, 1990, they were replaced by the Personal Property Security Act, S.B.C. 1989, c. 36 (the “PPSA”), which rationalized the creation, registration and enforcement of chattel security instruments generally.  (See R.C.C. Cuming and R.J. Wood, British Columbia Personal Property Security Act Handbook (4th ed., 1998), at 31.)  However, although the PPSA expressly applies to conditional sales, it contains no definition of the term.  The trial judge below found that he was bound by two decisions of this court and two decisions of his own court to the effect that notwithstanding its repeal, the Sale of Goods on Condition Act definition continues to inform the meaning of the phrase in s. 86 of the Motor Vehicle Act.  The appellant, a young woman  who was severely injured due to the negligent driving of the respondent Henry Ming Hang Au, asks us to reconsider those authorities and to find that the extended definition no longer applies to the words “contract of conditional sale” in s. 86(3), which creates an exception to the liability imposed by s. 86(1).  The result would be that the respondent Transportaction Lease Systems Inc. (“TA”) would be deemed to have been the principal of Mr. Au and therefore vicariously liable for the appellant’s injuries.

FACTUAL BACKGROUND

[3]                On the evening of December 1, 1998, Ms. Yeung was a passenger in a car driven in Richmond, British Columbia by Henry Ming Hang Au (“Au Jr.”), then 18 years of age.  He was driving at excessive speed and lost control of the vehicle.  It crossed the centre line and was struck on its passenger side by a vehicle driven by Katherine Yen.  Ms. Yeung was in a coma for some time and not expected to live.  Fortunately, she woke up several weeks later; but she had suffered a brain injury that has severely affected almost every aspect of her life.  Her litigation guardian claimed substantial damages from the drivers of both cars.  Eventually the claim against Ms. Yen was dismissed, leaving as defendants Au Jr., his father Anthony Tak Kai Au (“Au Sr.”), and TA.  The trial judge granted judgment in favour of Ms. Yeung in the amount of $5,800,000 plus other fees and charges to be determined, against both Au Jr. and Au Sr.

[4]                As will be seen below, Au Sr. had leased the car from TA in order to make it available to Au Jr.  Liability attached to the father as an “owner” (as defined by s. 1 of the Act), a conclusion that is not challenged by any of the parties appearing.  (Au Sr. was not represented at trial and like his son, has evidently left the jurisdiction.)  The question for the court below, and for this court on appeal, is whether TA is also vicariously liable as an “owner” pursuant to s. 86(1) of the Act, or whether it falls within the exception created by s. 86(3).

The Lease Agreement

[5]                The trial judge’s reasons are indexed as 2004 BCSC 1648 and reported at (2004) 43 B.C.L.R. (4th) 380.  At paras. 15-26, he described in detail the leasing arrangement between Au Sr. and TA.  He found that in October 1997, Au Sr., being “interested in acquiring a car for use by Au Jr.”, spoke to a salesman, Mr. Ho, at a local BMW dealership.  Au Sr. chose a BMW Z3.  Mr. Ho contacted TA and requested two lease quotations for a 36-month lease with an acquisition cost of $52,000.  Ultimately, the BMW dealership sold the car to TA for $52,000.  TA in turn leased the vehicle to Au Sr., using a pre-printed lease agreement.  Attached to the lease was a “Schedule A” containing additional terms which gave the lessee an option to purchase the car at the end of the 36 months. 

[6]                Over the term, Au Sr. was to pay monthly rental of $398 plus tax.  Paragraph 8 of the agreement stated that title to the vehicle would remain in the lessor (or its assignee) and that the lessee would not “encumber, convert, abandon, pledge, sell, conceal, assign, hire, re-lease [or] lend” the vehicle so as to impair TA’s title.  If at the end of the term he was in good standing under the lease, Au Sr. was entitled to exercise the option to purchase the vehicle “in its then condition and at its then location, at its then fair market value”, agreed to be $45,000.  The agreement also called for the lessee to pay a $25,000 “deposit” which would be applied against the purchase price if the option was exercised. 

[7]                If the option was not exercised at the end of the three-year term, the term of the lease was automatically renewed for another 12 months, after which the lessee could again exercise an option to purchase, again for fair market value.  Failing the exercise of the option, TA was entitled (but not obliged) to sell the car by private or public sale.  If the sale price proved to be less than the defined market value by reason of unreasonable wear and tear, the lessee would be obliged to pay the deficiency to the lessor.  The $25,000 deposit also stood as security for this obligation. 

[8]                The lease required that Au Sr. as lessee obtain $1,000,000 third party liability insurance.  However, TA through its salesman Mr. Maldowan insisted that Mr. Au actually carry coverage of $2,000,000.  TA also obtained its own liability insurance, although Mr. Maldowan was unaware of that fact at the time.  The trial judge elaborated:

… The Lease also contained a reference to policies of insurance covering the lessor's liability as owner of the vehicle, and the evidence at trial disclosed that Transportaction did have its own insurance coverage in respect of the BMW Z3 (although it was not specified whether there was a single policy relating only to the BMW Z3 or whether the vehicle was covered under an umbrella policy covering all of the vehicles registered in the name of Transportaction). Counsel for Transportaction objected to the introduction of this evidence and I took the objection under advisement. Although evidence of insurance coverage is normally inadmissible, I have concluded that the evidence is admissible in this case because it is relevant to the issue of whether Transportaction was an owner of the car for the purposes of s. 86 of the Motor Vehicle Act at the time of the accident.  [At para. 20.] 

[9]                Counsel did not refer to any evidence as to the use of the vehicle by Au Sr., and there is no doubt TA was aware he intended it for use by Au Jr.  (Strangely, the lease stated that the vehicle was to be used for business purposes, but nothing was made of this restriction by counsel.)  TA gave Au Sr. a power of attorney for purposes of registering and insuring the vehicle with ICBC.  For reasons that are still unknown, but which counsel seem to agree were due to some mistake, ICBC’s registration records showed TA as lessor and Au Jr. as lessee.  On the other hand, when TA registered its security interest in the car pursuant to the PPSA, Au Sr. was correctly shown as the debtor.

[10]            Finally, the lease contained a choice of law provision at para. 20 as follows: 

This Lease shall be construed according to the laws of the Province of Ontario.  If any provision herein contravenes the laws of any jurisdiction where this Lease is to be performed, such provision shall be deemed not to be part of this Lease and such event shall not void or affect the remaining provisions or the validity of this Lease. 

Post-Accident Events

[11]            As I have mentioned, the accident in which Ms. Yeung was so severely injured occurred on December 1, 1998, about 13 months into the lease.  The leased vehicle was written off by ICBC as a total loss, and ICBC and TA agreed that its fair market value prior to the accident had been $51,000.  TA signed a salvage release form in which it declared that it had been the registered owner and the sole legal or beneficial owner of the vehicle.  ICBC issued a cheque for $51,000 payable jointly to TA and Au Sr., which it forwarded to TA.  Although the cheque was not endorsed by Au Sr., TA was able to deposit the funds into its bank account.  The trial judge described the subsequent financial adjustments as follows: 

… Transportaction then made an internal calculation based on a lease payout amount of $51,800 and determined that it was owed a shortfall of $936 including taxes, leaving $24,064 of the $25,000 downpayment to be held on account of Au Sr.  Transportaction is still holding these funds.  It subsequently received another cheque from ICBC in the amount of $1,591 payable to itself and Au Jr. for the rebate on the insurance premium.  Transportaction endorsed this cheque and sent it to the address it had on record for the Au family.  

During the cross-examination of the Transportaction witnesses, counsel for Ms. Yeung endeavoured to establish that Transportaction kept the excess funds of $24,064 because it considered itself to be the owner of the vehicle.  Counsel pointed to the facts that the rebate cheque had been endorsed and mailed to the Au address and that the only attempt Transportaction made to locate Au Sr. was contacting Mr. Ho of Brian Jessel BMW.  Although Transportaction could have exerted more effort to locate Au Sr., I find that its lack of effort was not motivated by anything more than an expectation that Au Sr. would be contacting it to retrieve his funds.  I find that Transportaction has been holding the funds on account for the benefit of Au Sr. and has not been treating them as its own.  [At paras. 25-6.] 

(I note that although the trial judge called the $25,000 a “downpayment”, the lease agreement referred to it as a “deposit”.) 

The Choice of Law Clause

[12]            Counsel for Ms. Yeung raised a threshold issue that falls to be determined before s. 86 may be considered – whether the law of Ontario, agreed by the parties to the lease to be the proper law of their contract, applies to the question of vicarious liability on the part of TA.  In Mr. Murphy’s submission, since TA had raised the existence of the lease in its pleadings the Court was bound to construe and give effect to its terms.  TA’s invocation of s. 86(3) of the Act was said to amount to the assertion of a “contractual defence”, as referred to in a passage in J.‑G. Castel, Canadian Conflict of Laws (4th ed., 1997):

Where a wrongful act takes place in one of the provinces or territories of Canada, the court of that province or territory will apply its own domestic law to determine the rights and liabilities of the parties, no matter how limited the parties’ connection with that jurisdiction.  However, where the defendant raises a contractual defence or exemption from liability, its effect will be determined by the proper law of the contract.  [At 669; emphasis added.]

[13]            Mr. Murphy cited Kingsway General Insurance Co. v. Canada Life Assurance Co. (2001) 149 O.A.C. 303, as illustrating this proposition. In Kingsway, Canada Life had issued an insurance policy for medical expenses to a resident of Ontario who was planning to travel to Florida.  She was injured in a motorcycle accident there and received medical care, for which Canada Life paid.  It then sought to subrogate its claim against Kingsway General Insurance Company in Ontario, which had issued a motor vehicle policy to the driver responsible for the accident.  The trial judge ruled that Canada Life’s claim was excluded by a provision of Ontario’s Insurance Act, which denied subrogation rights in respect of health care expenses.  The Ontario Court of Appeal upheld this result, ruling that although the law of Florida might apply to whether a tort had been committed, the proper law of the contract of insurance was that of Ontario, where Canada Life had issued the policy.  The policy provided for subrogation rights, but also stated that if any of its terms or conditions was in conflict “with the statutes of the province … wherein this policy is issued, the terms and conditions are hereby amended to conform to such statutes.”  The Court therefore applied the Ontario Insurance Act provision.  In the words of Goudge J.A. for the Court: 

      In arguing for the applicability of Florida law to determine whether Canada Life has a right of subrogation the appellant relied on the jurisprudence exemplified by Tolofson v. Jensen, [1994] 3 S.C.R. 1022.  In that case La Forest J. for the majority of the Supreme Court of Canada held that the rule of private international law that should generally be applied in torts is the law of the place where the accident occurred.

      In my view, it does not follow from this that because the accident in this case happened in Florida, Florida law is applied to determine whether Canada Life has a right of subrogation.  It may be that the determination of whether the driver of the motorcycle was at fault for the accident is to be determined according to Florida law.  However, the right of Canada Life to subrogate to the position of its insured depends not on tort law but on its contract with its insured. The question is whether Canada Life has contracted away its right of subrogation in the circumstances of this case.  That question is one of contract law not tort law.

      I do not think there is any doubt that the policy issued by Canada Life must be interpreted according to Ontario law, not Florida law.  The policy was issued to residents of Ontario by a Canadian company headquartered in Ontario.  The clear implication of paragraph 8.4 is that the policy is to conform to the statutes of Ontario.  There is no suggestion in the language of the policy that it is to be interpreted according to Florida law.  Hence I think Spence J. was correct in concluding that the evidence of Florida law tendered before him was not relevant to his task of interpreting the contract between Canada life and its insured Shirley Stoesser.  [At paras. 11-3; emphasis added.] 

[14]            The trial judge in the case at bar disagreed that Kingsway had any relevance to the facts before him.  In his analysis, the situation here was the reverse, in that the question of liability, including vicarious liability, depended not on contract law but on tort law.  He found this situation to be more analogous to that in Bagg v. Budget-Rent-A-Car of Washington–Oregon Inc. (1989) 35 B.C.L.R. (2d) 36 (C.A.).  It involved a collision in British Columbia between two cars rented in the United States.  Although the rental contract relating to the negligently-driven car stated that the customer or driver was not to be deemed an agent of the rental company/owner, this court ruled that what was then s. 79 of the Motor Vehicle Act (now s. 86) applied to the question of the company’s vicarious liability.  As the trial judge in the instant case observed:

… The Court held that, although the proper law of the tort was the domestic law of British Columbia, it would entertain the submission of the rental company that the issue of vicarious liability should be determined on the basis of the American approach that vicarious liability is determined according to the laws of the state having the most significant relationship to the parties and the occurrence.  The Court concluded that British Columbia law should apply on that basis as well.  There is no reason to consider the American approach to the issue of vicarious liability in the present case (especially after Tolofson) but, if one were to apply it to these circumstances, it is clear that British Columbia has the most significant relationship to the parties and the negligent act of Au Jr.  The more important point was that there was no suggestion in Bagg that the issue of vicarious liability should be determined by the laws of the jurisdiction governing the rental contract.  [At para. 38; emphasis added.]

[15]            Similarly, the trial judge here concluded that the issue of vicarious liability was to be determined by the law of the jurisdiction of the tort in question, i.e., the law of British Columbia. This was consistent with the decision of the Supreme Court of Canada in Tolofson v. Jensen [1994] 3 S.C.R. 1022, a case decided after BaggTolofson left little doubt that generally, the lex loci delicti applies to questions of liability arising from torts.  Since in the trial judge’s view the interpretation of the lease was not germane to that issue and the governing law of the lease was irrelevant, he did not find it necessary to admit into evidence an opinion as to the law of Ontario regarding TA's possible liability.  (That opinion, which was in the appeal book, was to the effect that as the registered owner and lessor of the vehicle, TA would have been considered the “owner” of the vehicle and, having consented to Au Jr.’s use thereof, would have been directly liable for damages suffered by reason of his negligence pursuant to s. 192 of the Highway Traffic Act, R.S.O. 1990, c. H-8.) 

[16]            On appeal, Mr. Murphy on behalf of Ms. Yeung sought to cast doubt on the trial judge’s conclusion that the question of TA’s vicarious liability was subject to the law of British Columbia rather than that of Ontario.  None of counsel's submissions, however, seriously challenged the applicability of the lex loci delicti to the issue of TA's vicarious liability.  This application is consistent both with Tolofson and much older English authority: see The M. Moxham (1876) 1 P.D. 107 (C.A.), cited by J.‑G. Castel and J. Walker, Canadian Conflict of Laws (6th ed., 2005), at §35.7, and by Dicey and Morris, The Conflict of Laws (12th ed., 1993), at 1522-3.  If and when TA were to sue Au Sr. for damages for breach of the lease contract, the law of Ontario might well be relevant to issues of liability arising between them; but it is clear that a person such as Ms. Yeung, using the highway in British Columbia, is entitled to the benefits of the law of the place of the tort, including any vicarious liability provisions in her favour. 

[17]            In summary, I conclude that the trial judge did not err in finding that the “choice of law” clause in the lease was irrelevant and that the law of British Columbia applies to the question of whether TA is vicariously liable, along with Au Sr., for his son’s negligence in the operation of the vehicle. 

Motor Vehicle Act, s. 86

[18]            The trial judge turned next to s. 86 of the Act.  It provides in material part: 

Responsibility of owner in certain cases

86 (1) In an action to recover loss or damage sustained by a person by reason of a motor vehicle on a highway, every person driving or operating the motor vehicle who is living with and as a member of the family of the owner of the motor vehicle, and every person driving or operating the motor vehicle who acquired possession of it with the consent, express or implied, of the owner of the motor vehicle, is deemed to be the agent or servant of that owner and employed as such, and is deemed to be driving and operating the motor vehicle in the course of his or her employment.

* * *

(3) If a motor vehicle has been sold, and is in possession of the purchaser under a contract of conditional sale by which the title to the motor vehicle remains in the seller until the purchaser becomes the owner on full compliance with the contract, the purchaser is deemed an owner within the meaning of this section, but the seller or the seller's assignee is not deemed to be an owner within the meaning of this section.

Also relevant is the definition of “owner” in s. 1 of the Act: 

“owner” includes a person in possession of a motor vehicle under a contract by which he or she may become its owner on full compliance with the contract …”

[19]            The trial judge acknowledged at para. 40 of his reasons that at first glance, one might not think that a lease constitutes “a contract of conditional sale by which title to the motor vehicle remains in the seller until the purchaser becomes the owner on full compliance with the contract”.  However, he said, “the issue begins to lose its simplicity when one considers that the [Sale of Goods on Condition Act], which governed conditional sale contracts until 1990 in British Columbia, defined the term ‘conditional sale’ to include a lease containing an option to purchase.”  Section 1 had stated:

“conditional sale” means a contract

(a)        for the sale of goods under which possession is or is to be delivered to the buyer, and the property in the goods is to vest in him at a subsequent time on payment of the whole or part of the price or the performance of any other condition; or

(b)        for the hiring of goods by which it is agreed that the hirer shall become, or have the option of becoming, the owner of the goods on full compliance with the terms of the contract;

[20]            When the Sale of Goods on Condition Act was repealed in 1990 and replaced by the PPSA, the term "conditional sale" was no longer defined in any statute, although it does appear in the PPSA.  Section 2(1) thereof states that the new personal property security regime applies:

(a)        to every transaction that in substance creates a security interest, without regard to its form and without regard to the person who has title to the collateral, and

(b)        without limiting paragraph (a), to a chattel mortgage, a conditional sale, a floating charge, a pledge, a trust indenture, a trust receipt, an assignment, a consignment, a lease, a trust, and a transfer of chattel paper if they secure payment or performance of an obligation.  [Emphasis added.]

[21]            As the trial judge noted, this court has commented on two occasions post‑PPSA on the meaning of “contract of conditional sale” in what is now s. 86(3) of the Motor Vehicle Act.  In Schoenbach v. Truong (1996) 19 B.C.L.R. (3d) 313, the question was whether Ford Credit Canada Ltd. (“Ford”) was vicariously liable for the negligence of the defendant Truong, who had leased a car from Metro Motors Ltd., which in turn had assigned the lease to Ford.  The lease agreement gave Truong an option to purchase the vehicle at the end of the term of the lease if he complied with its terms.  In fact, he allowed the insurance to lapse in contravention of the lease and was then involved in the accident with the plaintiff Schoenbach.  There was no question that Truong was liable as an “owner” (as defined by s. 1 of the Motor Vehicle Act quoted above) but the trial judge applied a decision of Spencer J. in Huddleston v. Ramzan (1988) 26 B.C.L.R. (2d) 266 (S.C.), to conclude that Ford was vicariously liable as well.  In Huddleston, Spencer J. had written: 

… the exemption provided by s. 79(3) [now 86(3)] of the Motor Vehicle Act only applies “where a motor vehicle has been sold”.  Under the ordinary conditional sale contract, a vehicle is immediately subject to an agreement for purchase and sale.  In that sense it is sold, although title does not pass until the final payment is made.  Under this contract of hiring, with its included option, the vehicle might never be sold to the hirer.  It would only be sold in the event the hirer exercised the option.  Therefore, in my opinion, the lease vehicle could not, on the date of this accident, be described as one which “has been sold” and therefore s. 79(3) has no application to this case.  S. 79(1) sets up a statutory form of vicarious liability applicable to all owners.  Subsection 3(3) then goes on to provide an exemption to that statutory liability and can only be effective with respect to those who bring themselves strictly within the words of the exemption.  It follows that in my opinion the defendant Docksteader Investments Inc. is vicariously liable for the negligence of Mr. Esson, who acquired possession of it with the express or implied consent of Docksteader.  [At 272; emphasis of underlined words added.]

The result would have been otherwise, of course, had the parties’ agreement not been a lease with an option but a conditional sale agreement in the common law sense. 

[22]            On appeal in Schoenbach, McEachern C.J.B.C., with whom Donald J.A. concurred, disagreed with Huddleston.  They doubted that the Legislature had “intended to divide the conditional sales agreements in s. 79(3) into two categories, one of which would be exempt from vicarious liability and one of which would not, on the basis of a literal interpretation of the word ‘sold’.”  (Para. 8.)  The Chief Justice continued:

I agree with counsel for Ford that this is a case where s. 8 of the Interpretation Act, R.S.B.C. 1979, c. 206 must be applied.  It provides:

8.         Every enactment shall be construed as being remedial, and shall be given such fair, large and liberal construction and interpretation as best ensures the attainment of its objects.

With respect, I do not read s. 79(3) as an exemption to s. 79(1), but as part of the definition of "owner" for the purposes of that section.  Section 79(3) defines "owner" in a way which excludes sellers under contracts of conditional sale.  Although I have no doubt that s. 79 was enacted to extend vicarious liability to legal owners in certain circumstances, I do not believe that it was the intention of the Legislature to extend that liability to legal "owners" under certain kinds of commercial paper but not others.  I believe that the Legislature intended to define "owners" in such a way as to exclude those who hold legal title under conditional sales agreements.

I am not persuaded that the inclusion of the word "sold" is an indication that the Legislature intended to depart from the definition of "conditional sale" found in the Sale of Goods on Condition Act.  In my view, and contrary to the view of the court in Huddleston, the context of s. 79(3) indicates that the word "sold" refers to an arrangement where the purchaser or lessor acquires possession of the vehicle on terms that permit legal title to be transferred when later specified events occur.  I do not agree that "sold" should be read in this context in its literal and legal signification, involving the completion of a purchase and sale including the transfer of legal title.

For these reasons, I would allow the appeal and declare that Ford cannot be vicariously liable for the negligence, if any, of Truong because of Ford's status as owner under the lease option agreement.  I expect this means that the action against Ford should be dismissed, but I leave it to counsel to frame the court's order appropriately.  [At paras. 10-13; emphasis added.]

[23]            Goldie J.A., with whom Donald J.A. also concurred, agreed with McEachern, C.J.B.C. but wrote separate reasons reviewing the “legislative antecedents” of the Sale of Goods on Condition Act in order to determine what “purpose, or mischief, the legislator intended or aimed to remedy”.  These antecedents related to the ability of a person in possession of unpaid goods with the owner’s consent, to give good title to a bona fide purchaser pursuant to the Factors Act, 1889 (52 & 53 Vict., c. 45).  In Helby v. Matthews [1895] A.C. 471, the House of Lords ruled that that statute did not apply to a hirer in possession under a hire purchase agreement (i.e., an agreement that gave the hirer an option, but did not impose an obligation, to buy the goods).  In 1922, the Uniform Law Conference of Canada sought to remedy the “mischief” thus created by extending the definition of conditional sale agreements to include any agreement “by which it is agreed that the hirer shall become, or have the option of becoming, the owner of the goods”.  (My emphasis.)  This extended definition was adopted in British Columbia by the Conditional Sales Act, S.B.C. 1922, c. 13 and carried through to the Sale of Goods on Condition Act, which remained in force until 1990.

[24]            Having reviewed this background, Goldie J.A. reasoned in Schoenbach as follows:

I can now state my conclusion after this unfortunately tedious recitation.  The purpose of the two lettered clauses in the definition was to remedy the mischief created by the distinction adopted in the Helby case.  As I have noted, the wording of s. 79(3) of the Motor Vehicle Act incorporates language from both clauses of the definition. The word "sold" and the phrase "contract of sale" connote the finality said to be associated with a conditional sale.  But the clause "on full compliance with the terms of the contract" is associated with a passing of title which may be optional. I am persuaded the legislature in enacting s. 79(3) intended to treat security arrangements between an unpaid vendor and the buyer in possession uniformly.  There is no commercial or other consideration that would dictate an opposite conclusion in light of the reason why the definition of "conditional sale" in the Conditional Act [sic] assumed its present bifurcated form.  This has led me to agree with the analysis of the Chief Justice.  [At para. 33; emphasis added.] 

In the result, Ford was deemed not to be an “owner” for the purposes of s. 79 of the Motor Vehicle Act.

[25]            The motor vehicle accident at issue in Schoenbach occurred prior to October 1, 1990, when the Sale of Goods on Condition Act was repealed.  This was not true of the accident in Alexander v. Bertram (2000) 72 B.C.L.R. (3d) 66, also a decision of this court.  As in Schoenbach, liability under what is now s. 86(3) was at issue, but the negligent driver, Mr. Bertram, had leased the truck from a Ford dealer under an arrangement which did not provide for an option to purchase.  Indeed, the lease stated, “This lease is one of leasing only.  Lessee does not have an option to buy the Vehicle.”  Following the execution of the lease and its assignment to Ford, however, the lessor had signed a handwritten document entitling the defendant/lessee to buy the vehicle at the end of the lease for $7,500.  That document was not assigned to Ford, and Ford had not been aware of it.  Nevertheless, Ford “invited” the Court at trial to extend the reasoning in Schoenbach to the arrangement in question.  It argued that when read together with the option, the lease “gave rise to an ‘arrangement’ whereby [the defendant] Bertram was deemed an owner within the meaning of s. 79(3), but Ford was not deemed to be an owner within the meaning of the section.”  (Para. 14.)

[26]            The Court did not accede to this invitation, noting that the only contract between Ford and the defendant Bertram had been a lease which expressly excluded any option to purchase.  In the analysis of Prowse J.A. for the Court:

… It is pursuant to the lease that Bertram took possession of the truck.  The option to purchase is a separate, albeit related, transaction between Melody and Bertram.  It is that document which gives rise to the conditional sale.  Neither the wording of s. 79(3) of the Act nor the Schoenbach decision supports a finding that Ford was entitled to the benefit of the option to purchase granted by Melody to Bertram when it was unaware of the option and, in any event, would have refused to take an assignment of it.  Such an arrangement does not fall within the meaning of the section.  Nor, in my view, is it relevant for the purposes of applying s. 79(3) that Ford "permits" its dealers to enter into their own arrangements with their customers when it is clear that Ford is not bound to comply with such arrangements.  [At para. 18.] 

In the result, the Court held that the Chambers judge had not erred in finding that Ford was an “owner” of the truck for purposes of s. 79.  At para. 16, however, of her reasons, Prowse J.A. went on to refer to Schoenbach and stated:

… This Court held that a contract which fell under either definition exempted the "seller" from liability as an owner under s. 79(3).  It did not purport to deal with an "arrangement" similar to that between Ford, Melody and Bertram. (As a matter of historical interest, I note that the Sale of Goods on Condition Act was repealed by s. 106 of the Personal Property Security Amendment Act, S.B.C. 1990, c. 11, on October 1, 1990, the same day that the Personal Property Security Act, S.B.C. 1989, c. 36, was brought into force.  The Personal Property Security Act does not contain a definition of "conditional sale".  That being the case, there is no reason to doubt that the reference to "conditional sale" in s. 79(3) continues to be to the definition in the Sale of Goods on Condition Act.)  [Emphasis added.]

[27]            The trial judge in the instant case noted that these dicta and Schoenbach had been applied by the Supreme Court of British Columbia in at least three other cases, namely Heringa v. Mah [2000] B.C.J. No. 2751, Nickel v. Happy Auto Sales Inc. [1997] B.C.J. No. 2810, and Brady v. Skidmore, 2003 BCSC 348, 36 M.V.R. (4th) 161.  The trial judge found that these decisions were binding on him with respect to the proposition that the term “contract of conditional sale” in s. 86(3) meant “conditional sale” as defined in the Sale of Goods on Condition Act prior to its repeal.  The obiter dicta comments of this court were, although not binding, to be given weight.  The next question as he saw it was whether the meaning of the term had changed in 1990 when the Sale of Goods on Condition Act was repealed and the PPSA came into effect. 

[28]            In answering this question in the negative, the trial judge reviewed the purpose and structure of the PPSA, which by its terms applies to “every transaction that in substance creates a security interest”, without regard to its form.  (As well, the PPSA expressly applies to “a conditional sale”, and portions of the statute apply to a lease with a term of more than one year (s. 3(c))).  The trial judge reasoned:

… In Schoenbach, the B.C. Court of Appeal determined, in dealing with an accident which occurred prior to the enactment of the PPSA, that the Legislature intended the phrase to have the same meaning as the definition of "conditional sale" in the Sale of Goods on Condition Act.  In my view, the Legislature did not manifest an intention to change that meaning when it repealed the Sale of Goods on Condition Act and introduced the PPSA.  

The Legislature would have manifested an intention to change the meaning of "contract of conditional sale" in s. 86(3) if it had introduced a new definition of "conditional sale" in the PPSA, but it did not do so.  There is nothing in the PPSA which assists in determining whether a particular contract is a contract of conditional sale. It follows in my view that there is nothing in the PPSA to indicate that the Legislature intended to change the meaning of "contract of conditional sale" for the purposes of s. 86(3).  Section 37(1) of the Interpretation Act, R.S.B.C. 1996, c. 238, specifically provides that the repeal of an enactment and the substitution for it of another enactment must not be construed to be a declaration about the previous state of the law.  In other words, the replacement of the Sale of Goods on Condition Act with the PPSA is not, without something more, to be construed as a declaration that the Legislature wanted to change the meaning of "contract of conditional sale" in s. 86(3).

I do not believe that it can be inferred from the absence of a definition of "conditional sale" in the PPSA that the Legislature intended to change the meaning of "contract of conditional sale" in s. 86(3) from the definition in the Sale of Goods on Condition Act to its meaning at common law.  In view of the facts that the PPSA (i) applies to some leases for all purposes, (ii) applies to other leases for the purpose of requiring the registration of financing statements, and (iii) does not apply at all to other leases, it is my opinion that, unlike the Sale of Goods on Condition Act, the PPSA does not provide guidance on the question of how the Legislature intended leases to be treated for the purpose of s. 86(3).  [At paras. 55-7; emphasis added.]

[29]            Having held that the Sale of Goods on Condition Act remains relevant to the interpretation of s. 86(3), the trial judge stated that even if that were not the case, he would find that the lease was a “contract of conditional sale” on the basis that it “was a lease which, in substance, created a security lease.”  (Para. 59.)  In this regard, he noted Re Ontario Equipment (1976) Ltd. (1981) 125 D.L.R. (3d) 321 (Ont. S.C.), aff’d (1982) 141 D.L.R. (3d) 766 (Ont. C.A.), and Newcourt Financial Ltd. v. Frizzell, 2000 BCSC 1196, 20 C.B.R. (4th) 109, both of which were concerned with the availability of particular remedies to lessors under the PPSA.  Both suggested various factors to be considered in deciding whether a lease is a “true lease” or a “security lease”.  (The latter term was used by the Court in Frizzell but does not appear in the PPSA.  Presumably, it refers to a lease that secures “payment or performance of an obligation” within the meaning of s. 3 and s. 55(2) of the statute; although as R.A. Blair J. noted in Adelaide Capital Corp. v. Integrated Transportation Finance Inc. [1994] O.J. No. 103, 16 O.R. (3d) 414 (Gen. Div.), the two concepts are not mutually exclusive: there is no reason why a “true lease” cannot secure performance of an obligation.  If it does, it is caught by the Ontario PPSA legislation.)

[30]            In any event, the factors described in Frizzell led the trial judge in the case at bar to conclude that “in substance” the transaction between Au Sr. and TA was not a “true lease” but rather involved the creation of a security interest.  In his words: 

This is not a situation where a person decided to lease a vehicle from someone who owned it.  Despite the attempt to disguise it as a lease transaction, the reality is that Transportaction financed the acquisition of the vehicle by Au Sr. and the retention of title to the vehicle by Transportaction was the security interest upon which it relied to ensure payment of the amounts owing to it.  [At para. 67.]

The reference to a ‘disguised’ acquisition would seem to have rested at least in part on the fact that Au Sr. was not required to pay sales tax on the $25,000 “deposit” at the time he entered the lease, but could defer it until any exercise of the option.  Whether the trial judge meant to suggest, however, that the lease agreement did not mean what it said – i.e., that it was effectively a sham or fraud on the tax authorities – is not clear.  Given the seriousness of such a suggestion, I proceed on the basis that had the trial judge viewed the agreement as a sham, he would have said so clearly. 

[31]            Finally, the trial judge considered Ms. Yeung’s argument that even if TA was not an “owner” of the vehicle by reason of its status as a vendor under a contract of conditional sale, it should still be found to be an owner by reason of other indicia of ownership.  He considered that he was bound by the reasoning in Schoenbach to the effect that the Legislature had not intended to “extend … liability to legal ‘owners’ under certain kinds of commercial paper but not others.”  He reasoned that when s. 86(1) and (3) are read together, “the word ‘owner’ in s. 86(1) excludes persons in the position of [TA] who hold legal title under conditional sale agreements.”  (Para. 69.)  Even if this were not the case, he viewed the indicia of ownership relied upon by Ms. Yeung as insufficient to fix TA with liability.  These included the fact that TA had declared in the salvage release form that it was the “sole legal or beneficial owner” of the vehicle, and that it had “exercised a number of rights as owner of the vehicle, such as having its own liability insurance”.  In the trial judge’s view, these “manifestations of ownership” were inseparable from TA’s status as “legal owner” under the lease.  Although TA may have “overstated” its interest in the vehicle on occasion, it had never denied Au Sr.’s interest in the car.  In conclusion, the trial judge stated:

The insertion of the phrase "and is in the possession of the purchaser" in s. 86(3) was meant to address the situation where a vendor (or lessor) under a conditional sale contract (or a lease with option to purchase) retained possession of the vehicle. In such a case, the vendor (or lessor) would be an owner for the purpose of s. 86(1) despite the existence of the conditional sale agreement (or lease). The phrase was not intended to make a vendor (or lessor) an owner under s. 86(1) simply because the buyer (or lessee) had allowed someone else to operate the vehicle in their absence. In the above passage from Schoenbach, McEachern [C.J.B.C.] commented that he did not believe that it was the intention of the Legislature to extend liability to legal "owners" under certain kinds of commercial paper but not others. Similarly, I do not believe that it was the intention of the Legislature to extend liability to legal "owners" to certain vendors under conditional sale contracts where possession of the vehicle has been delivered to the buyer, but not others.  [At para. 72.]

In the result, the Court dismissed Ms. Yeung’s action as against TA. 

ANALYSIS

[32]            On appeal, counsel’s arguments were pitched at three levels – first, the policy considerations underlying the principle of vicarious liability generally and s. 86 in particular, as compared with those underlying the definition of “conditional sale” in the former Sale of Goods on Condition Act; second, the principles of statutory interpretation relevant to the repeal of the Sale of Goods on Condition Act, and the apparent disconnection between it and s. 86 of the Motor Vehicle Act;  and third, the “true nature” or “real substance” of the lease agreement in this case.  In my view, however, the starting point must be the wording of s. 86 itself, bearing in mind the approach to statutory interpretation endorsed by the Supreme Court of Canada in Re Rizzo & Rizzo Shoes Ltd. [1998] 1 S.C.R. 27, adopted from Elmer Driedger, Construction of Statutes (2nd ed., 1983):

Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.  [At 87.] 

The Court in Rizzo also emphasized the principle, encapsulated at s. 8 of the Interpretation Act, R.S.B.C. 1996, c. 238, that every act “must be construed as being remedial” and must receive "such fair, large and liberal construction and interpretation as best assures the attainment of its object.” 

[33]            Consistent with the foregoing, when courts are asked to construe exemptions or exceptions to a general rule, they are “particularly concerned” that such provisions be interpreted in light of their underlying rationale and not be used to undermine the broad purposes of the legislation: R. Sullivan, ed., Driedger on the Construction of Statutes (4th ed., 2002) at 397.  In The Interpretation of Legislation in Canada (3rd ed., 2000), P.-A. Côté explains:

It is noteworthy that what is of concern here is the non-extension of exceptional provisions and not their restrictive interpretation.  In fact, the reasons that the legislature provided for provisions of exception are just as worthy of respect as those which justify the general rule.  The principle is that exceptions should not be extended; where there is doubt, the general rule is favoured over the exception.  [At 502.]

(See also Québec (Communauté urbaine) v. Corp. Notre-Dame de Bon-Secours [1994] 3 S.C.R. 3 at 18; Air Canada v. British Columbia [1989] 1 S.C.R. 1161 at 1167.)

[34]            Section 86 is one of a series of provisions in Part 1 of the Act dealing with the responsibility of owners for various breaches of duty, most of them statutory infractions.  Section 83(1) provides a definition of “owner” that includes purchasers under conditional sale agreements and lessees of motor vehicles, but that definition applies only to s. 83 and not to s. 86.  Section 83.1, headed “Liability of Owner for Speeding and Traffic Light Violations”, also provides its own definition of “owner”, which is said to include a “person in possession of a motor vehicle under a contract by which [he or she] may become the owner on full compliance with the contract.”  (My emphasis.)  It makes owners liable for certain contraventions captured by speed monitoring devices or traffic light safety devices where, presumably, the driver may not be identifiable.  Again, the definition does not apply to s. 86.  Section 84 requires an owner or person in a motor vehicle to provide information to police officers where a car is involved in an accident or contravention of the Act.  Section 85 is aimed at any person “in possession or control of a motor vehicle” who permits it to be driven or operated by a minor who does not have a driver’s licence.  Section 87 deals with the liability of members of a “licensed partnership” for penalties imposed under the Act, and s. 88 deems the registered owner of a vehicle to be a party to any offence committed by his or her employee, agent, or any person entrusted with possession of the motor vehicle. 

[35]            Placed in the midst of these provisions is s. 86, which deals not with contraventions of the Act but with civil liability for damages arising out of the operation of a motor vehicle.  Obviously, liability rests first with the negligent driver and it was not necessary for the statute to state that common law position.  The purpose of s. 86, then, is to extend liability as well to the owner in two situations – where the driver or operator is living with and as a member of the family of the owner, or where the driver or operator acquired possession of the vehicle with the owner’s express or implied consent.  Where these conditions are met, s-s. (1) deems the driver or operator to be the agent or servant of the owner, and to be driving or operating the vehicle in the course of his or her employment.  Effectively, this makes the owner liable on common law principles of agency.  Sub-section (2) clarifies that s-s. (1) does not relieve the driver or operator from liability, leaving open the possibility of recovery by an injured plaintiff from both the owner and the driver.

[36]            The predecessor provisions of s. 86 may be traced back in this province to 1937, when the Motor-vehicle Amendment Act added a new s. 74A in terms very similar to those of the present s. 86.  (See S.B.C. 1937, c. 54, s. 11.)  At that time, of course, liability insurance was not compulsory for drivers of motor vehicles.  Writing in 1989, the Law Reform Commission of British Columbia suggested the following underlying purposes of (then) s. 79, and noted its continuing relevance despite the advent of compulsory no-fault insurance: 

The original policy underlying section 79 appears to have been to increase the chances that a person injured in a motor vehicle accident would be compensated.  The section diminishes the possibility that an injured person will fail to find a solvent defendant against whom he can successfully assert a claim for damages.  By allowing recourse against two persons, both the owner and the driver, instead of one, the legislation placed the injury party in a more favourable position.  In 1937, the owner of a motor vehicle was somewhat more likely than a non-owner to be both a person of substance and insured, and therefore able to satisfy a claim for damages.  Moreover, a provision such as section 79 could also be expected to have the salutary effect of making an owner much more cautious in allowing his motor vehicle to be operated by others, since entrusting an irresponsible person could involve the owner in substantial liability. 

The role of section 79 has become somewhat different since the advent of compulsory automobile insurance.  Today, the result of section 79 is that an owner's insurer compensates parties injured as a result of the negligent operation of the owner's motor vehicle.  Whether vicarious liability is necessary to achieve this purpose might seem open to question.  However, the concept remains significant in two respects:  for indemnification and for recovery outside the scope of insurance coverage. 

Compulsory automobile insurance operates on principles of indemnity.  For this reason, it is still necessary that the owner of a motor vehicle be held liable before an insurer can be called upon to compensate a third party.  Section 79 consequently retains its importance as a theoretical link in seeing that the claims of injured persons are properly satisfied.  [At p. 12-13]

(See Report on Vicarious Liability under the Motor Vehicle Act, 1989, Report No. 106, at 12‑3.) 

[37]            As counsel pointed out in another context, the British Columbia legislative scheme is the converse of that existing under the Ontario Highway Traffic Act, R.S.O. 1980, c. 198, which was considered in Zago v. Davies (1985) 18 D.L.R. (4th) 272 (Ont. C.A.).  The Ontario legislation makes the owner directly (rather than vicariously) responsible for the negligent operation of a motor vehicle on a highway.  The rationale behind this scheme was described by Cory J.A. (as he then was) in Zago as follows:

The section was enacted for compelling social and practical reasons. The negligent operation of a motor vehicle can cause crippling injuries and death leading to crushing financial hardship for the victim. The legislators no doubt considered that the owner of a motor vehicle was more likely to be financially capable of bearing the responsibility for that financial hardship, either through his personal holdings or insurance coverage than, for example, a 16-year-old driver using the vehicle with the owner's permission.

It is as necessary today as it was in 1930 to ensure, as far as can be done by legislation, that compensation is available to those who suffer loss as a result of the negligent operation of motor vehicles.  It is appropriate to provide that compensation by placing responsibility upon the owner as well as the driver of a motor vehicle.  [At 274-5.]

[38]            Although a different approach was taken in British Columbia, the purposes of s. 86 are, I would suggest, similar – to expand the availability of compensation to injured plaintiffs beyond drivers who may be under-insured or judgment-proof, and to  encourage employers and other owners to take care in entrusting their vehicles to others.  These objectives are consonant with the objectives of vicarious liability generally, as described by McLachlin J. (now C.J.C.) in Bazley v. Curry [1999] 2 S.C.R. 534, 62 B.C.L.R. (3d) 173, the leading Canadian case on vicarious liability:

… "One of the most important social goals served by vicarious liability is victim compensation.  Vicarious liability improves the chances that the victim can recover the judgment from a solvent defendant." (B. Feldthusen, "Vicarious Liability for Sexual Torts", in Torts Tomorrow (1998), 221, at p. 224.)  Or to quote Fleming, the master is "a more promising source of recompense than his servant who is apt to be a man of straw" (p. 410).

However, effective compensation must also be fair, in the sense that it must seem just to place liability for the wrong on the employer.  Vicarious liability is arguably fair in this sense.  The employer puts in the community an enterprise which carries with it certain risks. When those risks materialize and cause injury to a member of the public despite the employer's reasonable efforts, it is fair that the person or organization that creates the enterprise and hence the risk should bear the loss.  This accords with the notion that it is right and just that the person who creates a risk bear the loss when the risk ripens into harm.  While the fairness of this proposition is capable of standing alone, it is buttressed by the fact that the employer is often in the best position to spread the losses through mechanisms like insurance and higher prices, thus minimizing the dislocative effect of the tort within society. "Vicarious liability has the broader function of transferring to the enterprise itself the risks created by the activity performed by its agents" (London Drugs, per La Forest J., at p. 339).

The second major policy consideration underlying vicarious liability is deterrence of future harm.  Fixing the employer with responsibility for the employee's wrongful act, even where the employer is not negligent, may have a deterrent effect.  Employers are often in a position to reduce accidents and intentional wrongs by efficient organization and supervision.  [At paras. 30-2.]

[39]            Normally, s. 86(1) would apply to make a seller under a contract of conditional sale vicariously liable for the negligence of his or her deemed “agent”, since the seller remains an “owner,” in the sense that he or she retains title, until the purchase is completed.  But s-s. (3) creates an exception.  The exception, or exemption, is subject to two conditions – that the motor vehicle “has been sold”, and that it is in the possession of the purchaser under a contract of conditional sale by which title to the vehicle remains in the seller until the purchaser becomes the owner on compliance with the contract.  If these conditions are met, the seller or its assignee is “not deemed to be an owner” within the meaning of s. 86.  (Schoenbach would suggest that there is no real difference between this wording and “deemed not to be an owner”, although the latter wording would have been more accurate.)

[40]            Counsel did not refer us to any references in Hansard or in leading Canadian cases that would explain the reason for the exception created by s. 86(3).  The 1989 report of the Law Reform Commission suggests the exception recognized that "it would be unfair to treat a credit grantor such as a conditional seller as an owner … and expose him to risks he has no practical way of avoiding."  (Supra, at 17).  On the other hand, the Legislature did not make the exception applicable to the lessor of a vehicle, or to a chattel mortgagee.  As well, it required that the vehicle have been “sold”.  Applying the approach to interpretation adopted in Rizzo (which was decided after Schoenbach), it seems likely that the Legislature intended to extend the exemption to persons who had ‘sold’ and who had therefore parted not only with possession and control, but effectively with title, or ownership, of the vehicle.  On this approach, the exemption would not extend to a lessor who had granted an option that might never be exercised and who might therefore remain an “owner” long after the term of the lease has expired.

[41]            The context of Part 1 of the Motor Vehicle Act supplies additional support for this view.  As has been seen, the wording of s. 86(3) is narrower than that in the definition of “owner” in s. 83(1)(b) which includes “a person who rents or leases a motor vehicle from another person”.  The same is true of the definition in s. 83.1.  The wording used in s. 86(1) also differs from that used in the definition of “owner” in s. 1, which refers to a person who “may become” the owner of the vehicle on full compliance with the contract.  As Mr. Berardino submitted, s. 86(3) effectively contains its own definition of “contract of conditional sale” – i.e., a contract “by which the title to the motor vehicle remains in the seller until the purchaser becomes the owner on full compliance with the contract”.  This wording does not in my respectful opinion include a lease with option to purchase.  Although it may be true that this interpretation treats some forms of financing arrangements differently than others, that would appear to be the choice the Legislature made.  It chose to exempt situations involving “true” conditional sale agreements under which the purchaser will inevitably become the owner on completion of his or her obligations under the contract.  Other forms of chattel financing do not come within the exemption and remain subject to the vicarious liability principle imposed by s. 86(1). 

[42]            What then of the repealed Sale of Goods on Condition Act?  In my view, this question is answered by reference to the venerable common law rule stated by Lord Tenterden in Surtees v. Ellison (1829), 9 B. & C. 750, 109 E.R. 278 (K.B.) at 279:  “When an act of Parliament is repealed, it must be considered (except as to transactions past and closed) as if it had never existed.”  (See also Halsbury’s Laws of England (4th ed., 1995), vol. 44(1) at para. 1296; Odgers’ Construction of Deeds and Statutes (5th ed., 1967) at 357.)  Professor Côté, supra, summarizes the effect of repeal at common law thus:

i)          Because the repealed statute no longer has effect, institutions created within its purview cease to exist.   Corporations disappear, appointments are abolished, and regulations adopted under the authority of the statute are likewise repealed;

ii)         The repealing of the statute is deemed not to effect vested rights;

iii)         Offences committed prior to the repeal cannot give rise to legal proceedings, and those already undertaken must be stayed;

iv)        Legal rules previously repealed by the statute are revived, because the statute is deemed to never have existed.  [At 101.]

[43]            In British Columbia (as in most jurisdictions), some of these consequences have been modified by the Interpretation Act.  It states, for example, at s. 35(1) that the repeal of a statute affects neither an offence committed in contravention of the statute, nor a penalty or punishment incurred under it, nor a right or obligation acquired or accruing under a repealed enactment.  Section 35(1)(b) provides that the repeal of an enactment does not “affect the previous operation” thereof or anything done or suffered under it, but I do not read that provision as preserving the effect of an enactment, after its repeal, on another enactment.  Nor do I read s. 36, which applies where an enactment is repealed and another enactment is “substituted for it”, as having application in this case.

[44]            The trial judge found s. 37(1) of the Interpretation Act to be relevant.  It states:

The repeal of all or part of an enactment, or the repeal of an enactment and the substitution for it of another enactment, or the amendment of an enactment must not be construed to be or to involve either a declaration that the enactment was or was considered by the Legislature or other body or person who enacted it to have been previously in force, or a declaration about the previous state of the law.

This means that the repeal of the Sale of Goods on Condition Act must not be construed to be a declaration about the previous state of the law; but in my view, the provision does not assist in the present case one way or another.  It certainly does not imply that the Legislature intended to preserve pre-existing law or that a repealed definition nevertheless continues to have force and effect.  That this is so is reinforced by the fact that s. 37(3) does not refer to the repeal of an act, but to a statutory amendment, consolidation, re-enactment or revision.  None of the latter events is to be construed as involving an "adoption of the construction that has by judicial declaration … been placed on the language used in the enactment".  A fortiori, the repeal of an act surely provides no basis for assuming that previous judicial decisions construing a term are to be preserved and imported into other, unrelated, statutes.

[45]            The principle remains, then, that when a statute is repealed, it is considered “as if it had never existed”.  I consider this canon of construction to be particularly persuasive where, as here, the repealed statute had very different objectives from the surviving legislation being considered.  As we have seen, the definition in the Sale of Goods on Condition Act was enacted for reasons of commerce and title, while the genesis of s. 86 of the Motor Vehicle Act lay in extending the availability of compensation to persons injured due to the negligence of drivers on British Columbia roads. 

[46]            Counsel spent a good deal of their submissions on the effect of the enactment of the PPSA on s. 86.  They referred us to passages from Hansard when the PPSA was being debated, but the members of the Legislature were concerned with matters of chattel security enforcement and registration, and made no reference to the Motor Vehicle Act or vicarious liability for the negligent operation of motor vehicles.  This led TA to argue that the PPSA was not intended to amend the Motor Vehicle Act to impose liability in circumstances where lessors have not previously been liable.  Counsel also argued that the Legislature must be taken to have been aware of judicial decisions made prior to the enactment of the PPSA and that, as stated by Côté, supra, at 542, “Such decisions become part of the context of the legislation and therefore relevant to its interpretation.”  Thus, it was said, the Legislature “cannot have had an implicit intention to change the law regarding motor vehicle liability, since the PPSA went from a specific definition to a reference to a more general category of common law.  In other words, the more specific judicially-considered Motor Vehicle Act phrase cannot be replaced by the more general PPSA definition absent the manifest intention of the Legislature.” 

[47]            Counsel for Ms. Yeung contended on the other hand that when it repealed the Sale of Goods on Condition Act and enacted the PPSA, the Legislature set about to change and modernize the operation of business in British Columbia.  Since the Legislature chose not to define the term “conditional sale agreement” in the PPSA, Mr. Berardino argued that it must have intended that “the principles of the common law, against the backdrop of normal modern day business practices, would apply to interpret what constitutes a sale referred to in s. 86(3).”  In his analysis, this approach is supported by s. 68(1) of the PPSA, which provides that the principles of the common law, equity and the law merchant continue to apply and supplement the PPSA except insofar as they are not inconsistent with its provisions. 

[48]            At the same time, Mr. Berardino emphasized that we are concerned here not with the intention of the parties to the conditional sale contract, nor of the Legislature in enacting the Sale of Goods on Condition Act or the PPSA, but with the object and purpose of s. 86(3) of the Motor Vehicle Act.  He contended that s. 86 “captures” not only registered owners, but also persons who have contractual rights to become owners, just as it exempts persons who may appear to be owners but who are not owners “in substance” because they have sold, or entered into a transaction which de facto amounts to a sale of, their vehicles.  Applying this “de facto” approach to the question of whether the introductory words of s. 86(3) (“If a motor vehicle has been sold …”) have been met, the question becomes whether there has been a de facto sale, or sale in substance.  If not, the exemption given by s-s. (3) does not apply unless, Mr. Berardino submits, there has been a “disguised sale” of the vehicle.

[49]            Although I agree with Mr. Berardino that the arrangement between TA and Au Sr. was not a “disguised sale”, I find many of counsel’s arguments regarding the Legislature’s intention in enacting the PPSA without re-enacting the definition of “conditional sale” to be rather artificial.  It seems more likely that the legislative draftsman simply failed to note that in repealing the Sale of Goods on Condition Act, the Legislature might also be affecting the Motor Vehicle Act.  Further, I fail to see how the question of whether the arrangement at issue here was a “security agreement” assists the Court on the facts of this case.  We are not concerned with determining the “substance” of a transaction in order to decide an issue of title to goods or whether registration of a document is necessary before a creditor may enforce its rights under the PPSA.  We are concerned with applying a statute that imposes vicarious liability for negligence in the operation of a motor vehicle on certain persons and exempts others, depending on whether the vehicle has been “sold” under a “contract of conditional sale”.  In my opinion, this depends not on the “de facto” characterization of the arrangement, but on the ordinary meaning of the words used in the Act, as applied to the consequences in law of the terms and conditions agreed to by Au Sr. and TA in the lease agreement.

[50]            What then was the nature of that agreement in law?  Clearly, in my view, it was a lease.  It was called a “lease”.  It called for the payment of monthly “rent” for a three-year “term”.  At the end of the term, the lessee may have chosen to purchase the vehicle or he may not have.  Whether it would have been advantageous for him to have done so does not negate the fact that unless and until he did, title remained in the lessor.  Had Au Sr. done anything inconsistent with TA’s title, he would have been in default under the lease.  If he failed to observe any of his obligations under the lease, TA was entitled to exercise all the rights of an owner, subject to the PPSA.  On the other hand, if the option was exercised, a bill of sale would have had to be executed by TA.  In summary, this was not a “disguised sale”, nor what would have been called a contract of conditional sale at common law — i.e., an arrangement under which the purchaser agreed to purchase the goods and paid the purchase price by instalments, and under which the seller has agreed to transfer title to him upon receipt of full payment.  (See Goode and Ziegel, supra; Lee v. Butler [1893] 2 Q.B. 319 (C.A.); Halsbury’s, supra, vol. 9 (1) at para. 45; Mitsui & Co. (Cda) Ltd. v. Royal Bank of Canada [1995] 2 S.C.R. 187, at para. 13.)

[51]            Accordingly, and with respect, I believe the trial judge was in error in the case at bar in finding that the extended statutory definition in the repealed statute governing conditional sales continues to have relevance and application to the wording used in s. 86(3) of the Motor Vehicle Act.  I conclude that the reasoning in Schoenbach and the obiter dicta of the Court in Alexander should no longer be followed and that the exemption in s. 86(3) applies only where a motor vehicle has been “sold” pursuant to a true conditional sale agreement.  In that circumstance, the conditional seller is deemed not to be an “owner”.  In all other situations where a driver has acquired possession with the consent of an “owner” and operated the vehicle negligently, the driver is deemed to have been doing so in the course of his or her employment. 

The consequence in this case is that TA falls outside the exception in s. 86(3) and that since Au Jr. acquired possession of the vehicle with TA’s express or implied consent, the lessor is vicariously liable for Ms. Yeung’s damages.  It follows that I would allow the appeal and enter judgment against TA, as well as against Au Sr. and Au Jr. 

“The Honourable Madam Justice Newbury”

I Agree:

”The Honourable Madam Justice Rowles”

I Agree:

“The Honourable Mr. Justice Low”

I Agree:

“The Honourable Mr. Justice Thackray”

I Agree:

“The Honourable Madam Justice Kirkpatrick”